Political Mexico Risk Analysis
Introduction
Risk analysis is concerned about critically examining the losses and liabilities that may occur as far as the entire country’s operations are concerned. This paper will strictly focus on risks analysis in Mexico by analyzing its political, legal, social and financial environment. According to previous research, a comprehensive risk analysis report should entail the components mentioned above. Besides, the paper will describe the most desirable sectors for investments in Mexico, which include automotive, aerospace and production of surgical equipment. Again, the paper will provide the reader with a recommendation on the most lucrative industries for investment with the aid of Puerto Rico SWOT analysis approach. Risk analysis is vital for the Mexican sector as far as trading is concerned, and it is through this paper that a comprehensive report will be provided to provide strategies for improving Mexican economy
Political situation
The political environment is among the vital factors to be considered during risk analysis trading industry in Mexico. Political factors stand a higher chance of posing a risk to the industry, which would, in turn, lead to a loss. It is worth noting that political factors result in a noticeable change in trade. Trading industry in Mexico is composed of sectors which demands continuous adjustments based on technological advancement. The government controls the political aspects related to production sectors in Mexico, and it is the high time to note that the industry can be impacted at both local and federal levels of the government. As a result, the managers dealing with overseeing various sectors should always be ready to adjust based on international and domestic outcomes of the political environment.
Significance of the political environment during risk analysis
Consideration of the political environment is a critical factor during the analysis of risk in the trading industry of Mexico. Review of a trading environment as far as the manufacturing of equipment is concerned will help identify opportunities in the local market. Again, analysis of the political environment aids in determining suppliers manufactures and importer’s adherence to stipulated operating regulations. Criticizing maintaining a politically favourable environment will instigate the Mexican government to protect the public interest. Equally, considering the public interest should be at the forefront during risk analysis to ensure a healthy relationship among the various parties, including suppliers, government, and manufactures. Importantly, organizations should assess the political environment purposely to ensure that the goods produced for consumption meet the acceptable standards.
Changes in tax
Analysis of risks on the trading industry in Mexico should factor instances of decreased or reduced tax by the regulating authorities in Mexico. The Mexican government may decide to impose a high or low tax on manufacturing and trading of products, a situation which will need to be analyzed during risk analysis. Precisely, when the Mexican government hikes the income tax rates for the trading industry, the political environment will be adversely impacted. Equally, high taxation will lead to increased prices on traded products hence deteriorated demand. On the other hand, of risk analysis, the prices of goods will tend to reduce due to favourable tax rates from the Mexican government. Precisely, reduced taxable rates will enhance a more conducive environment in the trading industry in Mexico hence increased demand and more profit. To this end, it is evident that tax changes are a crucial consideration during risk analysis.
Changes in regulations
Changes in regulation are yet another aspect to be considered during risk analysis during risk analysis of the trading industry in Mexico. Trading regulations are concerned about the acceptable measures put in place by various regulating bodies. Some of the regulating trading rules include Pan American Standard Commission, International Organizations for Standards and Electrotechnical Commission. Besides, changes in regulations will be partly based on various manufacturing and trade regulations, including Mexican Standards (NMXs) and official Mexican Standards. The above laws are geared towards ensuring legal labelling and technical control which are usually issued by secretariats and government agencies. Notably, the manufacturing of products in Mexico will not only focus on local but also the international market. As such, the above manufacturing sector will require a supportive political environment to have well-established marketing roots with the help of strong inter-country ties. Notably, risk managers should always gauge trade favorability between Mexico and other trading countries. Notably, it is vital to consider a critical analysis of the political relationship among countries intending to engage in international trade.
Legal
Considering the legal aspect during risk analysis for Mexico is significant since it aids in the identification and mitigation of operational risks. The legal environment is directly associated with conducting businesses in Mexico, and it would contribute hugely to noticing threats that may be experienced during business transactions. According to Juergensmeyer & Blizzard (2012), companies do not operate in an environment where they dominate the entire market. As such, they must engage with other participants in the event of exploiting the available resources. Juergensmeyer & Blizzard (2012) further suggest that it is through engagements of business partners that legal obligation and liabilities are created, hence bringing the need for anticipating risk. Among the significant reasons for analyzing legal risk is to identify instances of fraud since it is considered as a major contributor to operational loss (Juergensmeyer & Blizzard, 2012). As a result, it would be much helpful for risk analysts in Mexico to put more emphasis on the legal aspect in a bid to account for operational costs appropriately.
The legal environment may be exposed to various shortcomings which makes it necessary for analysts to manage its risks. Risk comes in the form of losses and can be as a result of a fraudulent transaction. Juergensmeyer & Blizzard (2012) opine that legal risks may as well be triggered by a claim which leads to liability or loss hence resulting in a termination of a particular contract. Again, managers should be at the forefront of protecting the company’s assets from various sectors. As such, if mangers act contrary to the provisions of legal aspects, it may result in an obligation or loss. Juergensmeyer & Blizzard (2012) suggest that a change of law may trigger legal risks. Equally, a change in a specific law may suppress or promote various businesses. Notably, it may happen that the adjusted law does not support multiple transactions hence leading to legal risk, which needs to be analyzed. Unclarified company’s objectives, inappropriate communication and lack of enough information are among the significant contributors for legal risks.
Protecting the rights of participants
The process of analyzing risk in Mexico should take into consideration the interest and rights of organizations, employees, and society and most importantly, the consumers. Besides, intellectual property is also a vital aspect of review as far as the legal environment is concerned (Muller, 2016). In the first place, risk anticipation ought to assess the probability of consumer rights violation by critically analyzing the past and current protection laws. According to Muller (2016), organizations also have rights that need to be protected. As such, risk analyst will be required to determine the favorability of service providers in a particular market. Importantly, organizations should always factor employee’s rights for easy management of risks.
The legal environment contributes significantly to creating a favourable environment for conducting businesses. Attaining a manageable legal environment goes a long way with putting in place rules that reward and punish the participants who break or abide by the law propositions. The legally active environment is crucial in ensuring that organizations, employees and consumers act within the stipulated regulations. Muller (2016) enlighten that the risk analysis process should consider the losses that can be incurred following a participant’s violation of stipulated laws. Importantly, a legal yet favourable grounds needs always to be incorporated into a business transaction to ensure a healthy relationship among the participants.
Monopoly, licensing, investment, consumer protection, industrial, investment, foreign investment are among the aspects considered in the legal environment in Mexico. According to Muller (2016), risk analysts should access the current trends to identify the probability of experiencing adverse impacts of monopoly market. Muller (2016) affirm that licensing regulations need to be considered during risk analysis to ensure appropriate inclusion of legal documentation. Muller (2016) further attest that having comprehensive information regarding legal documentation in Mexico aids organization and employees in identifying the risk that occurs within their jurisdiction. In addition to identifying safe investment decisions, risk analysts should assess the favorability of two countries willing to engage in a contractual business.
Conformity to the land regulations in Mexico is yet another vital aspect included during risk analysis. Juergensmeyer & Blizzard (2012) suggest that organization ought to have precise information regarding the ownership of the land where its premises have been established. While analyzing their risk, organizations should put into consideration the risks and losses associated with losing property or hiked maintenance expenses. Juergensmeyer & Blizzard (2012) further opined that a legally operating environment in Mexico is attained by eliminating disruption as a result of land disputes or unpaid arrears. Notably, organizations should always understand that land laws changes, and it is vital to have the capacity to accommodate risks.